Prices both evaluate and communicate in international markets. For example, initially Hong Kong Disneyland’s early attendance was lower than expected, in part driven by what some called an unaffordable opening day price of $ 32 a ticket. Setting the right price for a product or service can be the key to success or failure. Even when the international marketer produces the right product, promotes it correctly and initiates the proper channel of distribution the effort fails if the product is not properly priced. Although the quality of US products is widely recognized in global markets, foreign buyers like domestic buyers, balance quality and price in their purchase decisions. An offering’s price must reflect the quality and value the consumer perceives in the product. Of all the tasks facing the international marketer determining what price to charge is one of the most difficult. It is further complicated when the company sells its product to customers in different country markets.
As the globalization of world markets continues, competition intensifies among multinational and home based companies. All are seeking a solid competitive position so they can prosper as markets reach full potential. The competition for the diaper market between Kimberly Clark, P&G and the smaller companies illustrates how price becomes increasingly important as a competitive tool and how price competition changes the structure of a market. Whether exporting or managing overseas operations, the manager’s responsibility is to set and control the actual price of goods in different markets in which different sets of variables are to be found: different tariffs, costs, attitudes, competition, currency fluctuation and methods of price quotation .
This article focuses on the basic pricing policy questions that arise from the special cost, market and competitive factors found in foreign markets. A discussion of price escalation and its control and factors associated with price setting and leasing is followed by a discussion of the use of counter trade as a pricing tool and a review of the mechanics of international price quotation.
Active marketing in several countries compounds the number of pricing problems and variables relating to price policy. Unless a firm has clearly thought out explicitly defined price policy, expediency rather than design establishes prices. The country in which business is being conducted the type of product, variations in competitive conditions and other strategic factors pricing activity. Price and terms of sale cannot be based on domestic criteria alone.
In general, price decisions are viewed in two ways: pricing as an active instrument of accomplishing marketing objectives or pricing as a static element in a business decision. If prices are viewed as an active instrument, the company uses price to achieve a specific objective, whether a targeted return on profit, a targeted market share or some other specific goal. The company that follows the second approach, pricing as a static element probably exports only excess inventory, places a low priority on foreign business and views its export sales as passive contributions to sales volume. When US and Canadian international businesses were asked to rate, on a scale of 1 to 5, several factors important in price setting, total profits received and average rating of 4.7 followed by return on investment (4.41) markets share (4.13) and total sales volume (4.06) liquidity ranked the lowest (2.19).
The more control a company has over the final selling price of a product the better it is able to achieve its marketing goals. However, controlling end prices is not always possible. The broader the product line and the larger the number of countries involved the more complex the process of controlling prices to the end user.
Source: International Marketing